The case for a subscription is usually made with one comparison: subscribers are worth three times what one-time buyers are. Recharge reports something close, with subscribers placing nearly three times as many orders as one-time shoppers across the brands it serves Reported. The comparison is true and it’s the wrong one.

Why the obvious comparison flatters

The customers who choose to subscribe were already your most committed. They’d have bought more than average without the subscription. How a customer arrives also changes how they behave. Studying a digital TV service, Hannes Datta, Bram Foubert and Harald Van Heerde found that customers who came in on a free trial behaved differently enough, even after correcting for who chose the trial, that their lifetime value was 59% lower than that of customers who paid from the start Published. Who a program attracts, and how, shapes what it’s worth as much as what the program does.

So compare like with like: subscribers against one-time buyers of the same first product, from the same months. Better still, randomize something. Show the subscribe option, or two discount levels, to a random split of product-page visitors, and compare 12-month contribution per visitor. Selection can’t bias that comparison.

Three pieces

1. Expected ordersFrom your survival table. A subscriber on a 30-day cadence has 12 scheduled orders in a year. Each counts only if they’re still subscribed when it ships, so expected orders are the sum of the survival rates at each one.
2. Contribution per order, after the discountThe discount comes out of contribution, not revenue. Say an order is $40 and leaves $18 after product, packing, shipping and fees. A 10% subscription discount is $4, which is 22% of the contribution. The discount always looks smaller than it is.
3. The comparisonWhat a similar one-time buyer is worth over the same 12 months, at full price. The subscription’s value is the difference, not the total.

A 10% discount on price is often a 20% discount on what the order leaves you.

Where the value sits

Run the example and look at the last number. Five fewer points lost at the first renewal adds $4.12 of contribution per subscriber, with no extra discount, on every new subscriber. Every later order depends on the subscriber getting past that first renewal, so survival at the start compounds through the whole year. It’s why the most valuable work in a subscription program is usually unglamorous: the right cadence, a reminder before the charge, and an easy skip.

The same math says when a subscription isn’t worth having. If your one-time buyers already reorder almost as often as subscribers would, and your contribution is thin, the discount can cost more than the extra orders earn. The tool will show a negative gap. Believe it, and consider the replenishment reminder from chapter 3 instead.

And if you acquire subscribers with a different first-order offer from other customers, include that in the comparison too, through payback. The Whole Machine has the payback tool; feed it the subscriber’s contribution by month.

Do this

• Run the tool twice: once with your subscribers’ real survival, and once with the survival you’d have if first-renewal losses fell by ten points. The difference, times the number of new subscribers you add in a year, is the budget for the work in part three.